Accounting & Auditing Update

The "Accounting & Auditing Update" is written by Tammy Whitehouse, a veteran business writer who has been a regular contributor to Compliance Week since 2005. Her work has also appeared in industry journals and periodicals including Journal of Business Strategy, Strategy & Leadership, Compensation & Benefits Review, Inc, Buyside, and myriad others. Whitehouse welcomes questions and comments from readers; she can be reached via e-mail at twhitehouse@complianceweek.com.

Restatement data for 2014 suggest companies are getting better at financial reporting—producing fewer erroneous reports, with less damaging effects, and correcting mistakes more quickly when they find them, the latest report from Audit Analytics shows. Contrary to all the good news, however, restatements among accelerated filers are not falling. More inside.

Data gathered by Protiviti and Audit Analytics from fiscal 2015 annual reports show that the implementation of the COSO framework for audited internal control over financial reporting is almost complete: 96 percent of companies reviewed used the 2013 Framework, in comparison to 82 percent for fiscal 2014. Tammy Whitehouse reports.

In the churn for new auditors, one Big 4 firm has held steady with its net number of audit clients while three others have seen net losses numbering in the 20s. Tammy Whitehousehas the results of the latest data from Audit Analytics.

According to a recent Audit Analytics study of fees paid in 2014 by 2,300 accelerated filers, 80.3 percent were focused on the integrated financial statement internal control audit; fees for non-audit services dipped to 19.7 percent of the total bill from the audit firm, a drop from 20 percent during the past several years. Before Sarbanes-Oxley, audit and non-audit services split almost exactly 50-50, suggesting the regulator crackdown on auditor independence violations is driving a significant gap between what companies pay for the financial statement audit compared with other non-audit services. Details inside.

Tammy Whitehouse has the results of a new study that shows audit cost increases for public companies are outpacing inflation, but the largest companies are taking measures to keep cost increases in check.

A recent report from Audit Analytics finds that large accelerated filers, or those with a public float greater than $700 million, are finding it difficult to get their annual reports filed on time. In 2010, says Tammy Whitehouse, only 10 large accelerated filers gave notice to the markets that their 10-K would be late. By 2015, 32 companies fell into that category.

Audit fees paid by public companies are starting to rise after several years of downward pressure from financial market turmoil and economic decline. Soon-to-be-published data from Audit Analytics will show audit fees paid by more than 2,300 accelerated filers, as a percentage of revenue, turned upward by an average of 1.4 percent in 2013 after four consecutive years of decline. Audit fees as a percentage of revenue peaked in 2004, when companies paid $592 in audit fees for every $1 million in revenue. More study details inside.

The total number of restatements that were serious enough to undermine reliance on prior financials fell to 161, the lowest level since 2006, according to the latest data from Audit Analytics. And the overall number of restatements dropped 12.7 percent in 2015 from the year before. Tammy Whitehouse has more survey results.